ETFs tracking Indian and Mexican equities fell sharply this week following unexpected election results from both countries, as India’s President Narendra Modi secured less of a majority than predicted and a landslide win from Mexico’s Morena party sparked fears of anti-market reforms.
In India, the Nifty 50 index was down 5.9% on Tuesday while the BSE Sensex lost over 2000 points, falling to its lowest level since early 2022.
Meanwhile, after Sunday’s presidential election, Mexico's benchmark stock market index – the Mexican IPC index – dropped 6% on Monday.
The results meant the $3.7bn iShares MSCI India UCITS ETF (IIND) fell a sharp 6.6% on Tuesday while the $621m Franklin FTSE India UCITS ETF (FRIN) tumbled 6% the same day.
IIND and FRIN’s top weighting is Reliance Industries, which saw its stock price plunge 9.6% on the Bombay Stock Exchange on Tuesday.
The market dip lies in stark contrast to India’s label as the powerhouse of emerging markets, with IIND and FRIN returning 12.9% and 12.3%, respectively year to date.
Meanwhile, the $220m Xtrackers MSCI Mexico UCITS ETF (XMEX) and $67m iShares MSCI Mexico Capped UCITS ETF (CMX1) fell 11% and 6.6%, respectively on Monday.
In 2023, ETFs tracking Mexican equities were among the best performing single country ETFs after the Bank of Mexico hinted at interest rate cuts in early 2024.
Yet, investors worry the Morena party’s victory may pave the way for market-damaging reforms, namely reevaluations of judiciary and pensions regulations.
